For thousands of contractors facing uncertainty about their roles post-April, the news this week that the Chancellor has promised a ‘soft landing’ to the new IR35 regulations will come as little comfort. These comments from Rishi Sunak are the latest in a line of frustratingly ambiguous government updates which are leaving many contractors still unsure of their position.
As the deadline for the regulatory change fast approaches, the lingering uncertainty comes through loud and clear in the question we hear almost daily: “What is everyone else doing?”. Given that there is no correct single approach to IR35, the most useful response, in my opinion, is to share a general snapshot of the market as we see it from our ongoing discussions with candidates and clients alike.
Within the recruitment industry, we are seeing a real split in how the candidate community is dealing with the change. It ultimately comes down to the risk profile of the individual and whether they truly understand the challenging nature of life as a contractor. The unpredictability of the work pipeline and the responsibility of running your own business isn’t for everyone, and the added issues around IR35 just pile on the pressure.
On one hand, we have spoken to those contractors who are fully engaged and who have already taken well thought through steps to become IR35-compliant. On the other, it is clear that many are still holding back from engaging with the new legislation; they tell us that they are instead adopting a ‘wait and see’ attitude in the unlikely hope perhaps that the government may still backtrack entirely or that somebody else may forge a good route they are happy to follow.
Much like the companies who have yet to make any decisions about what IR35 means for their ongoing projects, these contractors are only just coming round themselves to the stark reality of what it means. For many, it is the uncertainty that has been crippling.
What is interesting is the disconnect we are now seeing between the reaction of contractors and that of clients. Speaking to our contractor community, the vast majority have indicated they want to remain outside of IR35, and yet similar proportions of clients within our network prefer to bring all roles inside the fiscal regulations to remove any doubt around compliance.
Looking out at the wider market, we are seeing similar trends – BAE, for example, has only this week joined the growing list of multinational companies, including Barclays, HSBC, BP and Lloyds, who have chosen to implement a blanket-ban on contractors who use personal service companies (PSCs). As a result, come April, the market could see supply for roles outside IR35 easily exceed demand, which will make an already stressful situation even more challenging.
We are already seeing growing divisions between contractors and permanent employees, caused by differences of opinion on each side as to the significance and consequences of IR35. But ultimately, this rift, and the emotion that it brings, isn’t helpful – after all, everyone will still need to work together once April 6th has been and gone. Constructive positive communications between all parties needs to be the first step, with a detached focus on taking strides to making balanced decisions based on the facts we already have.
So, against this backdrop, what decisions are we seeing people make about their working futures?
Well, we come back to the individual risk profile of the contractor and whether their reasons for contracting in the first place mitigate the risks that inevitably come from sticking with the contracting life.
For example, some tell us they are choosing to alternate between roles which fall inside and outside IR35 because that flexible approach offers the best project options and and is the right career decision; it perhaps provides the opportunity to learn valuable new skills, take on more responsibility and take a step up the ladder. For practitioners in digital disciplines in particular, the gap between contract rates and permanent salaries is shrinking, and so the financial adjustments between roles may not be as drastic as many believe.
Others we speak to are making the decision to move on to a fixed-term contract where they receive the benefits of permanent employment but with a higher rate negotiated to off-set the lack of job security that comes with a full-time permanent role. For some organisations, paying the uplift in salary will be a small price to retain flexibility with resource while conforming to the new regulations.
Finally, some are deciding to remain in contracting roles which solely sit outside of IR35 because they believe their ways of working do genuinely fall in line with the status determination according to their individual assessment.
Whatever the route, it is clear that each opportunity should be treated on a case-by-case basis against the contractor’s own criteria, be that financial, lifestyle or even, as we are seeing, approach to risk.
If you’re a contractor looking for advice on the best option for you, or an Client looking to navigate the market, we are happy to share our experiences so feel free to give us a call.
Other similar news
Getting your business ready for IR35 ...
There’s a new speed bump in compliance for private sector companies that comes into effect on 6th April 2020. IR35 – or ‘off-payroll working’ – is designed to close a...
We’re partnering with Versus Arthritis!
We’re delighted to announce a new partnership with charity Versus Arthritis. Versus Arthritis conducts research into the cause, treatment and cure of arthritis, as well as providing information on how...
10 years of Futureheads
My job never has me far away from our numbers and being our 10th Birthday I thought I’d share some of my favourite stats from the last ten years. 4...